Looking at the mortgagee sales listings on TradeMe.co.nz and realestate.co.nz is a sobering process.

Every one of the 551 properties listed for sale on those sites at the beginning of this last week represented the failure of some sort of dream.

Often it is the dream of capital gains and rental cashflow combining to produce an independent income. Sometimes it is the dream of a new house designed by the owner.

Sometimes it is a simple dream of a family home on a small section in the suburbs.

The mortgagee listings online are rife with sections, apartments, rental flats in suburbs and even the odd luxury home in some of the ritzier parts of town.

The most obvious signs of these failed dreams are in the sections for sale. The pictures often show a bare lot of land overgrown with dry grass at the end of summer.

A total of 77 were being advertised this week on Trade Me. They show that the Kiwi dream for many of buying a section and building their own home has ended, in part because this land was over-priced.
 
Sections were the vulnerable items in the property collapse because they generated no income. When it became clear that the housing boom was over, their values were the first to fall and the first to be targeted by finance companies, banks and mortgage trusts.

One section on the fringes of Palmerston North with a rateable value of $164,000 has obviously been difficult to move. "Developers or individuals looking to secure a section in sought-after Tennyson Ave should explore this elevated site!", said the listing from Harcourts.

Exclamation marks seem to be a common feature of these listings. This section is essentially worthless in this market. Palmerston North has no shortage of flat land on its fringes and there are plenty of much cheaper houses already built for sale and ready to move into.

Apartments are also being pushed into mortgagee sales at an increasing rate. Trade Me this week had 37 mortgagee listings for apartments, ranging from $1.1 million (the listed price) to under $150,000.

Many of these are essentially worthless because of concerns about water-tightness, ground rent payments and the ability to earn cash in an economy where unemployment is headed to 8 per cent in a hurry. They will be sold at fire-sale prices.

The final category of broken dreams are family homes. These are less obvious and less numerous than many would think. There were 109 such listings for full houses.

Many appear to be investment properties forced on to the market, but the saddest cases are family homes the owner has been forced to leave.

We have monitored the scale of this problem since March last year on both major sites and have recorded a significant jump to record levels in the past two weeks.

Most mortgagee sales through last year were driven by finance company receivers targeting property investors and developers.

That wave mostly passed through the market and it seemed mortgagee listings might have peaked last month.

They have since taken off this month as mortgage trusts and now some banks are moving on property investors in particular.

They are the ones who geared up the most through 2005, 2006 and 2007 with 90 per cent-plus loans. As prices fall 10 per cent or more, banks are realising that if they wait they will be stuck trying to sell an asset that may be worth less than the loan.

The saving grace for New Zealand and its banks is that it doesn't face the sort of "shoot first and ask questions later" approach taken by banks in so-called "non-recourse" states in America.

Here, the bank is more likely to sit down with a home owner and try to restructure and work out the problem. That's why we have only a relatively small amount - 0.5 per cent - of mortgagee sales as a percentage of total sales.

For now, at least.

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This story was first published in the Herald On Sunday.